Big Bird Is Big Business

PBS’s well-feathered nest.

Jonathan V. Last

October 22, 2012, Vol. 18, No. 06

The mini-storm over Mitt Romney, the Corporation for Public Broadcasting, and Big Bird pitted two visions of the show’s finances against one another. Mitt Romney claimed he’d cut funding so that Sesame Street would have to air commercials. Big Bird defenders imagined a world in which a lack of federal money would put Big Bird out of business.

But both of these views are mystifying to anyone who has slogged through the aisles of Toys “R” Us, Kroger, or Target, where Sesame Street characters stare down at you aisle after aisle. The entire political debate seems designed to ignore the central question: Just how much money does Sesame Street make from licensing its franchise?

The answer is both more, and less, than you might imagine.

When Sesame Street first aired in 1969, it was a public-private partnership. About a year earlier, a group of private foundations put together grants along with some funding from the federal government to create a production company called the Children’s Television Workshop. The CTW was given $8 million in seed money to create a single new show. What they came up with was Sesame Street.

In 1981, the federal government pulled its funding from the CTW because it was pretty obvious that Big Bird was big enough that he no longer needed taxpayer dollars. (It crept back in the form of government grants and a small portion of funding from the Corporation for Public Broadcasting.) The Children’s Television Workshop had created not just an immensely popular program, but a mountain of intellectual property that could be profitably mined for decades. Which is exactly what they did.

The licensing opportunities came in two forms. First, there was the traditional world of product licenses. Characters such as Big Bird, Oscar the Grouch, and Cookie Monster began appearing on everything from greeting cards to toothbrushes. By 1984, Forbes estimated that the characters were appearing on 1,700 products doing $200 million worth of business just at the wholesale level. And that was the last year before things really took off. Because in 1985 the show introduced Elmo, who quickly became its flagship character and most bankable property.

The licensing regime only grew from there. In 1990 CTW licensed their franchise to a company building Sesame Street Store retail shops. There were Sesame Street videogames, sheets, towels, soap dishes, bracelets, vitamins, shoes, and every other flavor of merchandise imaginable. And none of that includes the toys.

By 1981, Sesame Street had entered the toy realm with licensing agreements with Fisher-Price, Mattel, and others. (People in the industry still talk about the Christmas of 1996, when the “Tickle Me Elmo” doll became a national sensation.) But in 2009 they switched partners and signed an exclusive contract with Hasbro. No one knows exactly what the terms of the new deal were, but Mattel’s CFO told reporters that what his company had been giving Sesame Workshop (as the CTW had rebranded itself) was one of the top 10 such arrangements in the toy business.

It’s a sign of how seriously the company takes its licensing programs that the woman it hired as vice president of licensing in 2011 was recruited from IBM, where she ran Big Blue’s brand advertising operation.

Over the years, Sesame Workshop has tried to present its licensing partnerships as contributing to its nonprofit mission. Thus, when Sesame Workshop signed deals with Del Monte and Sunkist, they emphasized that their Sesame Street-branded products would be healthy snacks for kids. When they sold the rights to their characters to Procter & Gamble for use on Pampers-brand disposable diapers, they couched the move as part of their efforts to promote “reliable quality products for children and the families who care for them.”

But that’s been a hard line to hold. In addition to the Sesame Place theme park north of Philadelphia and the Sesame Street Forest section of Busch Gardens, it’s estimated that roughly 100,000 products have borne the Sesame Street imprimatur over the last 40 years.

Which brings us to the company’s second form of licensing: the show itself. Today Sesame Street airs in something like 140 countries (the exact count is always shifting). In most places, Sesame Workshop sells to TV stations an edited, dubbed version of the show. But in two dozen or so countries, Sesame Workshop has licensed the rights to the property so that producing partners can co-create their own versions of Sesame Street. So, for instance, in Germany there’s Sesamstrasse while in India there’s Galli Galli Sim Sim.

As Vincent Vega would say, the difference between the American Sesame Street and its foreign incarnations is in the little things. In France’s 5, Rue Sésame, there’s no Big Bird character. In South Africa’s Takalani Sesame, one of the puppets has HIV.

But the purpose of all of these international versions is the same: to bring the educational and social power of America’s premiere preschool television program to children across the globe. It should be noted that these international franchises also result in licensing revenues from the foreign TV partners and—coincidentally—a multiplying of the consumer audience for other Sesame Street-licensed products. In the year following the debut of the Japanese homegrown version of the show, Sesame Workshop product-license revenue jumped 4 percent, largely from growth in Japan.

The bottom-line: In 2011 Sesame Workshop took in $46.9 million in licensing income from Sesame Street. That doesn’t seem like much, given the breadth of its river of royalty money. But keep in mind two things: First, Sesame Workshop is a 501(c)(3) nonprofit, and since they’re tax-exempt they have to be careful about how much money they make. It seems pretty likely that if they were a for-profit enterprise, they could really be raking it in. Second, they don’t really need all that much money. The American version of the show costs about $17 million a year to produce (a full season consists of 26 episodes). Even if a President Romney cut the cord entirely, there’s no reason Big Bird would need, as he has suggested, to run commercials.

So why do liberals think Sesame Street is in critical need of taxpayer support? Because Sesame Street’s production company, Sesame Workshop, has an annual budget of $133 million. The company employs 1,320 people and produces not just Sesame Street, but a host of other series—and other products—too. When you look at the budget, Sesame Workshop spends $37 million researching and producing all of its TV shows, foreign and domestic, $41 million producing “non-TV content,” and roughly $7 million on “Muppet acquisition.”

So does Big Bird need federal money? In their own way, the left and right are both correct. Sesame Street can get along easily without government funding. The Sesame Workshop—an entity that has grown inexorably since its founding and now encompasses items that have nothing to do with its original mission—cannot.

It’s fitting that the liberal view of Sesame Street mirrors the liberal view of the federal government itself.